What happened

Shares of Genworth Financial (GNW 0.31%), one of the biggest names in long-term care insurance, tumbled as much as 12% during Monday's trading session after it, along with China Oceanwide Holdings, a privately held and diversified Chinese holding company that's in the process of acquiring Genworth, provided an update on the buyout process. It should be noted that Genworth Financial shares recouped half of their losses and were down around 6% as of 2:45 p.m. EDT.

So what

As a refresher, Genworth Financial announced on Oct. 21, 2016 that China Oceanwide would acquire the company for $2.7 billion, or $5.43 a share. In doing so, it would provide Genworth with a sorely needed $600 million in cash to cover its 2018 debt maturity, and bolster the cash reserves for its U.S. life-insurance business by adding $525 million. On March 7, shareholders approved the deal, with 96% of those who cast their votes showing approval for the buyout.

Two businessmen shaking hands, symbolizing a merger.

Image source: Getty Images.

Late last week, Genworth and China Oceanwide provided an update on their merger. China Oceanwide noted that it withdrew and refiled their joint voluntary notice to the Committee on Foreign Investment in the United States (CFIUS) to give the regulatory body more time to review and discuss the proposed merger. This allows the 30-day review period and possible 45-day investigation period to start anew. It also allows Genworth and China Oceanwide to tidy everything up in terms of meeting regulatory approval for their proposed merger.

Though the companies both expect the acquisition to be completed on schedule by mid-2017, there's now obvious concern that the CFIUS may find something to be leery of with this combination.

Now what

Arguably, the biggest hurdle of all has been cleared by Genworth: Its shareholders voted in favor of the merger despite it being priced well below the company's book value. It demonstrates what sort of problems Genworth has been dealing with, as well as its necessity to find a buyer, given its approaching debt maturities in 2018, 2020, and 2021.

If the buyout goes through, investors could wind up with quite the arbitrage opportunity. After all, shares are hovering around $3.80, with a buy price of $5.43 a share. Then again, this discount to the acquisition price is pretty indicative that the CFIUS, or other X-factors, may exist that could derail Genworth's attempt to be acquired by a Chinese holding company.

If you own shares of Genworth Financial, I see no reason to sell, but at the same time, I see no reason to enter from the sidelines given the recent update. This situation has "watch and wait" written all over it.